Bed Bath & Beyond Buys Cost Plus

Bed Bath & Beyond ($BBBY) has opened up their wallet. The company is buying Cost Plus ($CPWM) for $22 per share which works out to $495 million. Based on yesterday’s closing price, that’s a 22% premium. The best part for BBBY shareholders is that the deal is all cash.

Cost Plus, Inc., which will continue to be headquartered in Oakland, California following the transaction, is a leading specialty retailer of casual home furnishings and entertainment products in the United States. The company currently operates 259 stores under the names World Market, Cost Plus World Market, Cost Plus Imports, and World Market Stores in 30 states.

I like this deal and it’s a small dent in Bed Bath & Beyond’s checkbook. According to the most recent balance sheet, BBBY is sitting on $1.76 billion in cash, which is $7.61 per share. In terms of BBBY’s stock, that deal is worth about $2.14 per share.

The deal is expected to close during BBBY’s second quarter (June, July and August). BBBY expects the deal to be “slightly accretive.” Let me explain what that means: BBBY is “buying” CPWM’s earnings at a price less than the going rate for BBBY’s earnings. As a result, the deal will show a net increase to BBBY’s bottom line for this year.

The press release notes: “Bed Bath & Beyond Inc. continues to model a high single digit to a low double digit percentage increase in net earnings per diluted share in fiscal 2012.”

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